ACFE webinar examines “levels of accountancy” in business fraud

SIUE’s School of Business offered students free admission to a webinar held by the Greater St. Louis Area Chapter of the Association of Certified Fraud Examiners (ACFE). The event’s guest speaker was University of Illinois’ Assistant Professor of Accountancy Christie Hayne, who discussed her research into fraud and accountability.


Hayne said the research was focused on the question “What pushes some individuals toward fraud, and others away?” Hayne said she and her fellow researchers interviewed people convicted of fraud, but also people who overcame the pressure to commit fraud and avoided doing so. In this research, Hayne said she referred to these individuals as “victors”.


“As far as the fraudsters go, I actually, with my co-authors, visited five U.S. penitentiaries to conduct these interviews,” Hayne said. “And then for the victors, it was an extensive recruitment process, through personal and professional contacts, social media, LinkedIn, to try and find individuals who had faced some sort of pressure or invitation to participate in fraud, but refused.”


Hayne’s research was conducted by going to prisons and asking prisoners if they were convicted of fraud, and if they would speak to her about it. According to Hayne, there were many rules and guidelines she had regarding who she and the other researchers would interview. 


“The first [caveat to our research] is that we did not have control over who volunteered. When we went to prisons, we had posted recruitment posters in advance of our visit, and those who felt that they were relevant to our research attended an interview … so our actual results may contain a response bias. Prisoners in particular may be subject to a self-serving bias, or may embellish their particular circumstances,” Hayne said. “We did a lot to try and overcome this issue … we asked prisoners whether they are guilty or innocent of the crime for which they are serving a sentence, and we threw away any responses if the prisoners claimed innocence.”


Chair of the Accounting Department Brad Reed has a focus on fraud investigation, and he said investigating fraud like in these cases has always been an interest to him. Reed said this field was where he first started in business. 


“I’m a certified fraud examiner, as well as a certified public accountant. Both roles have some responsibilities to find fraud,” Reed said. “I started out as an auditor, and auditors have always had some responsibility to find fraud.”


According to Reed, this area of study has greatly advanced in the last 20 years, so it is an interesting field for students to learn about. Reed also said the culprits of these crimes are sometimes the last person you’d expect, which also draws interest. 


“In the early 2000s, it became a more important and emphasized field, and I started doing research,” Reed said. “It seems to me that students like learning about it. I think they’re interested in it, and it’s always interesting to see different kinds of fraud. White collar crime is often surprising to people. As in, surprising to see the people who commit it. A lot of these people are people who you would least expect to commit crimes, so it’s interesting to learn about that.”


President of the Greater St. Louis Area Chapter of the ACFE Jill Simons spoke at the webinar, and she said the ACFE is offering free memberships to some students for this month. 


“One of our chapter’s missions is to mentor and support the next generation of anti-fraud professionals, and the way we’re going to do that is we come up with an opportunity for students where, for a limited time … we [give] away free student ACFE St. Louis Chapter memberships through Feb. 28,” Simons said. 


According to Reed, the importance of teaching fraud investigation also comes from how common it can be.


“Studies show that most businesses experience fraud at least once, or even multiple times. It's important to know it will happen and what to do to prevent it,” Reed said. “It’s a really growing field, and more and more students are showing interest in it, and more firms are getting involved in it.”


While presenting her research, Hayne talked extensively about something called the “fraud triangle,” which is something that, according to Reed, is very commonly discussed in the world of fraud investigation.


“When the three corners come together, there is a higher probability of someone committing fraud. One corner is circumstances, so that means someone has to be in a situation where they need money, which they may try to get through fraud. It can be from gambling, or from someone who has lived beyond their needs for too long,” Reed said. Opportunity is another corner, where you work at an organization with weak controls or security measure, and the third corner is rationalization, because most people work their whole lives without committing a major crime, so they find a way to rationalize doing just one thing.”


However, Reed said just because there are three corners for the fraud triangle, that doesn’t mean all three must be present for someone to commit fraud.


“I always use the analogy, though I didn't make it and it’s a common thing, but it’s like fire. For a fire, you need fuel, a heat source and oxygen, and those things together can sometimes create a fire,” Reed said. “But, if the heat source is strong enough, the other two factors don’t matter as much, and a fire starts anyway. If one of the factors is high enough, someone can be pushed to fraud. There’s a breaking point.”


For more information, check the St. Louis Chapter of the ACFE’s website.


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